Discover home equity loan review 2024

Discover® home equity loans have a lower-than-average minimum APR and no application, origination or appraisal fees — a standout feature among lenders, especially since closing costs can reach up to 6% of your total loan amount.

We also like that Discover approves loans for borrowers with as little as 10% equity and in nearly every state. Other home equity lenders have tighter requirements and are much more geographically limited.

But, if you're looking for a smaller loan (or a very large one) keep in mind that Discover only approves home equity loans for between $35,000 and $300,000.

A home equity loan allows you to borrow money using the equity in your house as collateral. Equity is the difference between your remaining mortgage and your home's market value.

Unlike a home equity line of credit, which is essentially a revolving line of credit, a home equity loan makes a specific amount of money available in one lump sum. Most have fixed interest rates and borrowers make regular monthly payments over a predetermined period.

You can use the money for any purpose, whether it's funding home repairs, covering emergency medical bills or paying down a higher-interest debt, like a credit card bill.

Discover offers home loans in every state except for Iowa and Maryland. 

• APR: Fixed-rate options from 7.99% to 12.86% (as of July 2024)
• Repayment terms: 10, 15, 20 or 30 years
• Loan minimum and maximum: $35,000 to $300,000
• Closing timeline: Six to eight weeks

• Credit score: Discover requires a credit score of at least 680 for a home equity loan. 
• Cumulative loan-to-value ratio (CLTV): The sum of your mortgages compared to the value of your house. While most lenders like to see a ratio of 80% or less, Discover will accept CLTV of up to 90%. 
• Debt-to-income ratio (DTI): The total portion of a homeowner's monthly income that goes towards paying off debts. Discover requires a DTI of no more than 43%.
• Home appraisal: A complete appraisal is required, but Discover does not charge a fee.

• Lender fees: Discover does not charge application, origination or appraisal fees or closing costs
• Prepayment penalty: No fee if you pay off your loan early.  
• Rate lock fees: Discover will lock your fixed rate for free as soon as you complete your application. 

While Discover was not included in J.D. Power's mortgage surveys, it came in second place in its 2024 Consumer Lending Satisfaction Study, which measured customer feedback on loan offerings, ease of doing business, trust, staff and more.

The Better Business Bureau gave Discover an A+ rating, its top grade, based on company behavior, including transparency, truthful advertising and how it responds to consumer complaints.

Here's how Discover stacks up against two other home equity loan providers. 

Discover vs. TD Bank

TD Bank's rate on a 10-year, $30,000 home equity loan starts at 8.84%. That's more than both Discover's 7.99% minimum APR and the industry average of 8.60%. TD charges also a $99 origination fee that Discover doesn't.

But which lender is better for you ultimately depends on the size of your loan, where you live and whether you prefer an in-person or online experience.

Discover will only approve loans of between $35,000 and $300,000, while TD Bank will lend as little as $10,000 or as much as $500,000 (or more, under certain terms).

Discover issues loans in 48 states and Washington, D.C., while TD Bank only services 15 states and the District. TD Bank does have over 1,000 branches for face-to-face service with a mortgage loan officer, though, while you can only apply with Discover online or over the phone.

Discover vs. Rocket Mortgage

A matchup between Discover and fellow online lender Rocket Mortgage is a bit of a draw, since Rocket doesn't disclose its minimum APR.

But Discover has no lender fees or closing costs, while Rocket Mortgage charges a $99 origination fee and closing costs that it says range between 2% and 6% of the loan. Rocket also limits repayment terms to 10 or 20 years, while Discover has options for 10, 15, 20 or 30 years.

When it comes to availability, Rocket Mortgage has a slight leg up: It approves loans nationwide, while Discover lends in just 48 states.

Loan limits might be the bigger issue: Discover maxes out at $300,000 on home equity loans, while Rocket will go as high as $500,000.

The benefits and drawbacks of a Discover home equity loan.

Pros

• Accepts combined loan-to-value ratio of up to 90%
• No lender fees or closing costs
• Mortgage refinancing available
• Available in most states

Cons

• No purchase mortgages or home equity lines of credit
• Must apply online or via phone
• $35,000 minimum loan amount is higher than most
• $300,000 maximum loan amount is lower than most

There is no in-person option but you can apply for a home equity loan on the Discover website or by calling 855-361-3435 Monday through Friday from 8 a.m. to midnight ET or Saturday and Sunday from 10 a.m. to 6 p.m. ET.

You'll need to provide personal details — including your name, address, birth date, employment status and income — and information about your home, like the type of property, estimated value and your current mortgage balance.

To get a customized quote, you'll have to upload identification, mortgage statements, W2s and your homeowner's insurance policy. You may have to send additional paperwork through the mail.

According to Discover, the process from quote to closing day usually takes six to eight weeks. Some lenders promise a faster closing, but the timeline for any home loan depends on various factors, including the amount you're borrowing, your credit history and how quickly you can schedule an appraisal.

If cost and availability are your lens, a Discover home equity loan could be the right choice. The minimum APR is lower than many competitors and there are no lender fees.

Plus, Discover lends in all but two states and has both easily accessible loan representatives and a history of superior customer service.

If you're looking to borrow a lot, though, you may need to explore other options: Discover maxes out at $300,000 on home equity loans, while other lenders will go up to $500,000 or even higher.

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